IT majors sign new deals at a discount

BANGALORE: Top Indian tech firms such as TCS, Infosys, Wipro, and HCL are signing new outsourcing contracts at 15-20% lower billing rates than last year, as customers including BT, Bank of America and Citibank renegotiate existing contracts and award new projects at much lower rates.

Over the past two quarters, customers such as Visa, Best Buy, Applied Materials, Nissan, Citibank and Bank of America have been in discussions with India-based service providers, asking them to help these companies cope with lower information technology budgets.

"The biggest fall has happened for high-end services such as consulting, from over $60 per hour earlier to around $40-45 on an average," said Sabyasachi S Sathyaparasad of Mindplex Consulting, an outsourcing advisory firm. "The rates could fall by up to 20% in the coming few months, but should get stabilised after that," he added.

Outsourcing customers are using the downturn as an opportunity to question high margins of Indian service providers. Top five Indian software companies renegotiated almost $1.5 billion worth of outsourcing contracts since September last year at around 15% lower rates.

"Some customers are asking us to let go on our high margins and take offshore projects for as low as $15-20 hourly billing rates," said an official of an India-based offshore provider.